How Morgan Stanley “Discovered” The Identity Of The Biggest Bond Buyer In The Past Two Years

Analyzing intraday time series in various markets is a familiar strategy, and has usually been applied to markets which have liquidity 24 hours of the day, such as FX. A good recent example was Deutsche’s report on “How To Make Money Trading FX? Just Wake Up At 3AM.” And while such regional time-series comps have been mostly conducted with currencies, over the weekend Morgan Stanley’s Matthew Hornbach did a similar analysis with rates.
What he found was startling.
As Hornbach explains, a key feature of his team’s work over the years has been to what extent and when have investors in Japan placed downward pressure on Treasury yields. This led him to consider whether or not the effect occurred during the Tokyo trading day or outside of the Tokyo trading day. Morgan Stanley then created 4 indexes to track the changes in 10y rates during 4 sessions of the global trading day: (1) the Tokyo session, (2) the London session, (3) the NY morning session, and (4) the NY afternoon session.

This post was published at Zero Hedge on Jan 17, 2017.